Michael Yardney reveals why ’70s apartments rock in his opinion. Is it the architecture, where they are located or is he just reminiscing about his youth? He gives us 5 reasons he likes them.
Kevin: As more and more people are deciding to trade up their back yards for balconies – that is, move into units and apartments – we’re seeing an increase in the popularity of this type of purchase, but what do you do? Do you go and buy one of those older ones, which quite frankly I love, because they have extra space in them, or are you going to look at one of the newer units?
Michael Yardney from Metropole Property Strategists is having a talk to me right now about the reasons why you might just want to have a look at some of those ’70s apartments.
Good day, Michael.
Michael: Hi, Kevin. Good morning.
Kevin: Yes, I love those older ones. They give you so much flexibility, don’t they? I’ve actually seen people turn their laundries – because they had quite big laundries – into an en-suite to add extra value.
Michael: There are lots of reasons why ’70s apartments rock. Sometimes they’re a bit ugly from the outside, if we’re talking about the ’60s and ’70s. If you go back a little bit further, if you go back a little bit further, if you’re looking at established apartments, particularly in Melbourne and Sydney, they built them in an art deco style and they really have character, as well. So yes, I see lots of reasons to consider buying an established apartment rather than the ones that are new or a couple of years old.
Kevin: Is it just my imagination, Michael, or are those ones from the ’60s and ’70s a bit bigger?
Michael: They are. The town planning regulations were different, the way we were living was different. They didn’t squeeze as many on the block, so therefore, in general, the sizes of them are in the 70 to 80 square meters for a two-bedroom apartment, where often now it’s 55 to 65 square meters. It’s not just that, Kevin; it’s also how they used the space. They had corridors, they had an entrance hall. You didn’t walk straight in and fall over your lounge suite, so I like the floor plan of a lot of them, as well.
Kevin: Yes, and they had the balconies, as well. Some of the new units simply don’t, or they just have those Juliette ones that you can’t really use, anyway.
Michael: That’s right. I think another great thing about the established apartments is their location. In our major capital cities in the ’60s and ’70s, they were building these in the suburbs, and often within five to seven kilometers of the CBD. Today, we are also building them, but they’re usually on main roads or they’re in the CBD. So I think their location within the suburbs – and those nice, gentrifying suburbs – are good also.
If you think about it, a lot of them that were built in those days, they were called flats, and they’re what I’d be distinguishing as a flat from what we now call apartments. Those were built, I guess, in general for tenants, but now, most of them are being bought up by investors or owner-occupiers wanting to live there because of the location and because of the size.
Kevin: And they’re still very affordable, too, even though they’re in, as you said, some of those now highly desirable areas.
Michael: If you do a price per square meter, you usually find that you couldn’t replace the building at the cost you’re buying established properties, and that’s what I call buying below intrinsic value, below replacement value, which doesn’t really occur when you’re buying the new apartments. So you actually get really good bang for your buck buying established apartments, Kevin.
Kevin: A bit of history comes with them, too, doesn’t it? They have really good bones.
Michael: Yes, they do. first of all, they have good bones because they’re not built with papier mâché. Now, I’m saying that sarcastically, but when you have a look at the way some of the new ones are being built, they’re not as solid, but the other thing is they have a history of resale values, so you can see how the property has performed over the years. Has it kept going up in value? Have there been problems with the owners’ corporation? Are there disputes within the owners?
When you’re buying a new property, you don’t have that history; you’re buying it based on what the developer has put on his sale price list, his schedule, rather than the resale values of established apartments, which in my mind, is a better way of putting a value on a property.
Kevin: Yes, Michael, and you made the point earlier, too, that these flats – as we used to call them – were built for tenants, but now, more and more people are coming and finding these that they can not so much turn them over, but add their extra bit to them, and become and owner-occupier, so the mix is much better, isn’t it?
Michael: There is definitely. There’s no doubt about it. The other thing that you mentioned is they can add their own bit to it. That’s one of the things I like. One of my strands of my five-stranded strategic approach is adding value. A lot of these ugly ducklings are ready to be improved, and improving the kitchens and bathrooms, which is the main area that sells the property and increases the value. That’s pretty easy to do.
I’m not suggesting you do structural renovations. They’re actually difficult, and often unable to be done, because your ceiling is somebody else’s floor, your wall is somebody else’s, so you won’t necessarily be able to knock out walls. But the comment you made a while ago about changing the laundry into an en-suite or changing a sunroom into another bedroom, you can reconfigure things and you can improve them, manufacturing some capital growth. You can’t do that with newer apartments, Kevin.
Kevin: So there you go. Next time you drive around one of those ugly blocks of apartments, don’t drive past; if you see one for sale, go ahead and have a look, and open your eyes to the possibilities. Michael, great talking to you, thanks for your time.
Michael: My pleasure, Kevin.